LABOUR TURNS BACK ON CITY

I am City A.M's deputy editor, having joined the newsroom in late 2010 as an economics reporter.

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Julian Harris

ED Miliband yesterday sounded the death knell on his party’s relationship with the City, singling out some elements of British business for praise yet promising to crack down on supposedly “predatory” financial services.

“Britain’s future will be built not on credit default swaps but on creative industries,” Miliband said in his speech to the Labour conference in Liverpool. “Not low wages and high finance, but low carbon and high tech – and not financial engineering, but real engineering.”

The Labour leader said voters’ living standards had been “squeezed by runaway rewards at the top” and took aim at “telephone number salaries at the banks”.

Under former Prime Ministers Tony Blair and Gordon Brown, Labour “did not do enough to change the values of our economy,” Miliband said.

He argued that some companies were “producers”, but others – such as “asset stripping” private equity houses – were “predators”.

The Labour leader drew on high profile business figures to explain his distinction between the good and bad.

But he dropped a clanger by contrasting banking pantomime villain Sir Fred Goodwin with Sir John Rose – without mentioning that the former Rolls Royce boss last week became a banker by joining Rothschild.

“Fred Goodwin was at the heart of the banking crisis -- compare him to Sir John Rose... a great British business leader. He is the true face of British business,” Miliband said.

“But at the time of the financial crisis, Fred Goodwin was paid over three times more than Sir John Rose.”

Laying the blame for the collapse of care home Southern Cross at the feet of private equity firm Blackstone, Miliband hinted that “predators” should be subject to higher taxes and tougher regulations than other firms.

“Look at what a private equity firm did to the Southern Cross care homes,” he said. “Stripping assets for a quick buck and treating tens of thousands of elderly people like commodities. They may not have sold their own grandmothers for a fast buck -- but they certainly sold yours.”

Business groups were sceptical following the speech. “We would like to know how Ed Miliband plans to identify and reward ‘good’ companies over ‘bad’ ones,” asked Miles Templeman of the Institute of Directors.

“Consumers and investors are better equipped and better informed than ever to impose discipline on firms than any government,” Templeman added.

And the Federation of Small Businesses hit out at Miliband’s pledge that he would only grant government contracts to firms with sufficient apprenticeship programmes.

“We are disappointed that the Labour leader does not understand how jobs and apprenticeships are created in the real world,” said FSB chairman John Walker.

Miliband also said that government should favour British companies when doling out state contracts. “When I am Prime Minister -- how we tax, what government buys, how we regulate, what we celebrate will be in the service of Britain’s producers.”